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Management accounting
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Main page In management accounting or managerial accounting, managers use accounting information in decision-making and to assist in the management and
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1 Definition
Contact us
2 Scope, practice, and application
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3 Financial versus Management accounting
Contribute 4 Traditional versus innovative practices
Historical cost ·
Help 5 Role within a corporation
Constant purchasing power · Management
Learn to edit 6 Specific methodologies · Tax
Community portal 6.1 Activity-based costing (ABC) Major types [show]
Recent changes
6.2 Grenzplankostenrechnung
Upload file Key concepts [show]
6.3 Lean accounting (accounting for lean enterprise)
Selected accounts [show]
Tools 6.4 Resource consumption accounting (RCA)
Accounting standards [show]
What links here 6.5 Throughput accounting
Related changes 6.6 Transfer pricing Financial statements [show]
Special pages 7 Resources and continuous learning [show]
Bookkeeping
Permanent link
8 Tasks and services provided [show]
Page information Auditing
9 Related qualifications
Cite this page People and organizations [show]
Wikidata item
10 Methods
Development [show]
11 See also
Print/export 12 References Misconduct [show]

Download as PDF 13 Further reading · ·


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14 External links

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Definition [ edit ]

Français One simple definition of management accounting is the provision of financial and non-financial decision-making information to
िह ी managers.[2] In other words, management accounting helps directors inside an organization to make decisions. This can also
Bahasa Indonesia
be known as cost accounting. This is the way toward distinguishing, examining, deciphering and imparting data to
Bahasa Melayu
supervisors to help accomplish business goals. The information gathered includes all fields accounting that educates the
Português
administration regarding business tasks identifying with the financial expenses and decisions made by the organization.
Русский
中文 Accountants use plans to measure the overall strategy of operations within the organization.

28 more According to the Institute of Management Accountants (IMA): "Management accounting is a profession that involves
partnering in management decision making, devising planning and performance management systems, and providing
Edit links
expertise in financial reporting and control to assist management in the formulation and implementation of an organization's
strategy".[3]

Management accountants (also called managerial accountants) look at the events that happen in and around a business
while considering the needs of the business. From this, data and estimates emerge. Cost accounting is the process of
translating these estimates and data into knowledge that will ultimately be used to guide decision-making.[4]

The Chartered Institute of Management Accountants (CIMA), the largest management accounting institute with over 100,000
members describes "Management accounting as analysing information to advise business strategy and drive sustainable IFAC Definition of enterprise financial management concerning three broad
business success". areas: cost accounting; performance evaluation and analysis; planning and
decision support. Managerial accounting is associated with higher value, more
predictive information.[1] Copyright July 2009, International Federation of
Scope, practice, and application [ edit ] Accountants
See also: Management accounting principles and Decision theory

The Association of International Certified Professional Accountants (AICPA) states that management accounting as practice extends to the following three areas:

Strategic management — advancing the role of the management accountant as a strategic partner in the organization
Performance management — developing the practice of business decision-making and managing the performance of the organization
Risk management — contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization

The Institute of Certified Management Accountants (CMA) states, "A management accountant applies his or her professional knowledge and skill in the preparation and presentation of financial and other
decision oriented information in such a way as to assist management in the formulation of policies and in the planning and control of the operation undertaking".

Management accountants are seen as the "value-creators" amongst the accountants. They are more concerned with forward-looking and taking decisions that will affect the future of the organization,
than in the historical recording and compliance (score keeping) aspects of the profession. Management accounting knowledge and experience can be obtained from varied fields and functions within an
organization, such as information management, treasury, efficiency auditing, marketing, valuation, pricing, and logistics. In 2014 CIMA created the Global Management Accounting Principles (GMAPs).[5]
The result of research from across 20 countries in five continents, the principles aim to guide best practice in the discipline.[6]

Financial versus Management accounting [ edit ]

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Management accounting information differs from financial accountancy information in several ways:

while shareholders, creditors, and public regulators use publicly reported financial accountancy, information, only managers within the organization use the normally confidential management
accounting information
while financial accountancy information is historical, management accounting information is primarily forward-looking[7][self-published source?];
while financial accountancy information is case-based, management accounting information is model-based with a degree of abstraction in order to support generic decision making;
while financial accountancy information is computed by reference to general financial accounting standards, management accounting information is computed by reference to the needs of managers,
often using management information systems.

Focus:

Financial accounting focuses on the company as a whole.


Management accounting provides detailed and disaggregated information about products, individual activities, divisions, plants, operations and tasks.

Traditional versus innovative practices [ edit ]

The distinction between traditional and innovative accounting practices is illustrated with the visual timeline (see
sidebar) of managerial costing approaches presented at the Institute of Management Accountants 2011 Annual
Conference.

Traditional standard costing (TSC), used in cost accounting, dates back to the 1920s and is a central method in
management accounting practiced today because it is used for financial statement reporting for the valuation of
income statement and balance sheet line items such as cost of goods sold (COGS) and inventory valuation.
Traditional standard costing must comply with generally accepted accounting principles (GAAP US) and actually
aligns itself more with answering financial accounting requirements rather than providing solutions for management
accountants. Traditional approaches limit themselves by defining cost behavior only in terms of production or sales
volume.

In the late 1980s, accounting practitioners and educators were heavily criticized on the grounds that management
accounting practices (and, even more so, the curriculum taught to accounting students) had changed little over the
preceding 60 years, despite radical changes in the business environment. In 1993, the Accounting Education Change
Commission Statement Number 4[9] calls for faculty members to expand their knowledge about the actual practice of
Managerial costing time line[8] Used with permission by the author A. van der Merwe. accounting in the workplace.[10] Professional accounting institutes, perhaps fearing that management accountants
Copyright 2011. All Rights Reserved. would increasingly be seen as superfluous in business organizations, subsequently devoted considerable resources
to the development of a more innovative skills set for management accountants.

Variance analysis is a systematic approach to the comparison of the actual and budgeted costs of the raw materials and labour used during a production period. While some form of variance analysis is
still used by most manufacturing firms, it nowadays tends to be used in conjunction with innovative techniques such as life cycle cost analysis and activity-based costing, which are designed with specific
aspects of the modern business environment in mind. Life-cycle costing recognizes that managers' ability to influence the cost of manufacturing a product is at its greatest when the product is still at the
design stage of its product life-cycle (i.e., before the design has been finalized and production commenced), since small changes to the product design may lead to significant savings in the cost of
manufacturing the products.

Activity-based costing (ABC) recognizes that, in modern factories, most manufacturing costs are determined by the amount of 'activities' (e.g., the number of production runs per month, and the amount of
production equipment idle time) and that the key to effective cost control is therefore optimizing the efficiency of these activities. Both lifecycle costing and activity-based costing recognize that, in the
typical modern factory, the avoidance of disruptive events (such as machine breakdowns and quality control failures) is of far greater importance than (for example) reducing the costs of raw materials.
Activity-based costing also de-emphasizes direct labor as a cost driver and concentrates instead on activities that drive costs, as the provision of a service or the production of a product component.

Other approach is the German Grenzplankostenrechnung (GPK) costing methodology. Although it has been in practiced in Europe for more than 50 years, neither GPK nor the proper treatment of
'unused capacity' is widely practiced in the U.S.[11]

Another accounting practice available today is resource consumption accounting (RCA). RCA has been recognized by the International Federation of Accountants (IFAC) as a "sophisticated approach at
the upper levels of the continuum of costing techniques"[12] The approach provides the ability to derive costs directly from operational resource data or to isolate and measure unused capacity costs. RCA
was derived by taking costing characteristics of GPK, and combining the use of activity-based drivers when needed, such as those used in activity-based costing.[12]

A modern approach to close accounting is continuous accounting, which focuses on achieving a point-in-time close, where accounting processes typically performed at period-end are distributed evenly
throughout the period.

Role within a corporation [ edit ]

Consistent with other roles in modern corporations, management accountants have a dual reporting relationship. As a strategic partner and provider of decision based financial and operational
information, management accountants are responsible for managing the business team and at the same time having to report relationships and responsibilities to the corporation's finance organization
and finance of an organization.

The activities management accountants provide inclusive of forecasting and planning, performing variance analysis, reviewing and monitoring costs inherent in the business are ones that have dual
accountability to both finance and the business team. Examples of tasks where accountability may be more meaningful to the business management team vs. the corporate finance department are the
development of new product costing, operations research, business driver metrics, sales management scorecarding, and client profitability analysis. (See financial planning.) Conversely, the preparation
of certain financial reports, reconciliations of the financial data to source systems, risk and regulatory reporting will be more useful to the corporate finance team as they are charged with aggregating
certain financial information from all segments of the corporation.

In corporations that derive much of their profits from the information economy, such as banks, publishing houses, telecommunications companies and defence contractors, IT costs are a significant source
of uncontrollable spending, which in size is often the greatest corporate cost after total compensation costs and property related costs. A function of management accounting in such organizations is to
work closely with the IT department to provide IT cost transparency.[13]

Given the above, one view of the progression of the accounting and finance career path is that financial accounting is a stepping stone to management accounting.[14] Consistent with the notion of value
creation, management accountants help drive the success of the business while strict financial accounting is more of a compliance and historical endeavor.

Specific methodologies [ edit ]

Activity-based costing (ABC) [ edit ]

Activity-based costing was first clearly defined in 1987 by Robert S. Kaplan and W. Bruns as a chapter in their book Accounting and Management: A Field Study Perspective. They initially focused on the
manufacturing industry, where increasing technology and productivity improvements have reduced the relative proportion of the direct costs of labor and materials, but have increased relative proportion
of indirect costs. For example, increased automation has reduced labor, which is a direct cost, but has increased depreciation, which is an indirect cost.

Grenzplankostenrechnung [ edit ]

This section may lend undue weight to certain ideas, incidents, or controversies. Please help to create a more balanced presentation. Discuss
and resolve this issue before removing this message. (August 2018)

Main article: Grenzplankostenrechnung

Grenzplankostenrechnung (GPK) is a German costing methodology, developed in the late 1940s and 1960s, designed to provide a consistent and accurate application of how managerial costs are
calculated and assigned to a product or service. The term Grenzplankostenrechnung, often referred to as GPK, has best been translated as either marginal planned cost accounting[15] or flexible analytic
cost planning and accounting.[16]

The origins of GPK are credited to Hans Georg Plaut, an automotive engineer, and Wolfgang Kilger, an academic, working towards the mutual goal of identifying and delivering a sustained methodology
designed to correct and enhance cost accounting information. GPK is published in cost accounting textbooks, notably Flexible Plankostenrechnung und Deckungsbeitragsrechnung[17] and taught at
German-speaking universities.

Lean accounting (accounting for lean enterprise) [ edit ]


Main article: Lean accounting

In the mid- to late-1990s several books were written about accounting in the lean enterprise (companies implementing elements of the Toyota Production System). The term lean accounting was coined
during that period. These books contest that traditional accounting methods are better suited for mass production and do not support or measure good business practices in just-in-time manufacturing and
services. The movement reached a tipping point during the 2005 Lean Accounting Summit in Dearborn, Michigan, United States. 320 individuals attended and discussed the advantages of a new
approach to accounting in the lean enterprise. 520 individuals attended the 2nd annual conference in 2006 and it has varied between 250 and 600 attendees since that time.

Resource consumption accounting (RCA) [ edit ]


Main article: Resource Consumption Accounting

Resource consumption accounting (RCA) is formally defined as a dynamic, fully integrated, principle-based, and comprehensive management accounting approach that provides managers with decision
support information for enterprise optimization. RCA emerged as a management accounting approach around 2000 and was subsequently developed at CAM-I,[18] the Consortium for Advanced
Manufacturing–International, in a Cost Management Section RCA interest group[19] in December 2001.

Throughput accounting [ edit ]


Main article: Throughput accounting

The most significant recent direction in managerial accounting is throughput accounting; which recognizes the interdependencies of modern production processes. For any given product, customer or
supplier, it is a tool to measure the contribution per unit of constrained resource.

Transfer pricing [ edit ]


Main article: Transfer pricing

Management accounting is an applied discipline used in various industries. The specific functions and principles followed can vary based on the industry. Management accounting principles in banking
are specialized but do have some common fundamental concepts used whether the industry is manufacturing-based or service-oriented. For example, transfer pricing is a concept used in manufacturing
but is also applied in banking. It is a fundamental principle used in assigning value and revenue attribution to the various business units. Essentially, transfer pricing in banking is the method of assigning
the interest rate risk of the bank to the various funding sources and uses of the enterprise. Thus, the bank's corporate treasury department will assign funding charges to the business units for their use of
the bank's resources when they make loans to clients. The treasury department will also assign funding credit to business units who bring in deposits (resources) to the bank. Although the funds transfer
pricing process is primarily applicable to the loans and deposits of the various banking units, this proactive is applied to all assets and liabilities of the business segment. Once transfer pricing is applied
and any other management accounting entries or adjustments are posted to the ledger (which are usually memo accounts and are not included in the legal entity results), the business units are able to
produce segment financial results which are used by both internal and external users to evaluate performance.

Resources and continuous learning [ edit ]

There are a variety of ways to keep current and continue to build one's knowledge base in the field of management accounting. Certified Management Accountants (CMAs) are required to achieve
continuing education hours every year, similar to a Certified Public Accountant. A company may also have research and training materials available for use in a corporate owned library. This is more
common in Fortune 500 companies who have the resources to fund this type of training medium.

There are also journals, online articles and blogs available. The journal Cost Management (ISSN 1092-8057 )[20] and the Institute of Management Accounting (IMA)[21] site are sources which include
Management Accounting Quarterly and Strategic Finance publications.

Tasks and services provided [ edit ]

Listed below are the primary tasks/services performed by management accountants. The degree of complexity relative to these activities are dependent on the experience level and abilities of any one
individual.

Rate and volume analysis


Business metrics development
Price modeling
Product profitability
Geographic vs. industry or client segment reporting
Sales management scorecards
Cost analysis
Cost–benefit analysis
Cost-volume-profit analysis
Life cycle cost analysis
Client profitability analysis
IT cost transparency
Capital budgeting
Buy vs. lease analysis
Strategic planning
Strategic management advice
Internal financial presentation and communication
Sales forecasting
Financial forecasting
Annual budgeting
Cost allocation

Related qualifications [ edit ]

There are several related professional qualifications and certifications in the field of accountancy including:

Management Accountancy Qualifications


CIMA
ICMA
ICAI-CMA
ICMAP
CMA
Other Professional Accountancy Qualifications
Chartered Institute of Public Finance and Accountancy, CIPFA
Chartered Certified Accountant (ACCA)
Cost & Management Accountant (CMA)
Chartered Accountant (CA)
Certified Public Accountant (CPA)
American Institute of Certified Public Accountants
Certified Practicing Accountant (CPA Australia)
Chartered Global Management Accountant

Methods [ edit ]

Activity-based costing
Grenzplankostenrechnung (GPK)
Lean accounting
Resource consumption accounting
Standard cost accounting
Throughput accounting
Transfer pricing

See also [ edit ]

Managerial risk accounting


Profit model

References [ edit ]

1. ^ Professional Accountants in Business Committee (2009). 9. ^ Accounting Education Change Commission (1993). "Positions 15. ^ Friedl, Gunther; Hans-Ulrich Kupper; Burkhard Pedell (2005).
Evaluating and Improving Costing in Organizations (International and Issues" . Issues Statement Number 4: Improving the Early "Relevance Added: Combining ABC with German Cost
Good Practice Guidance). International Federation of Employment Experience of Accountants. Sarasota, FL: American Accounting". Strategic Finance (June): 56–61.
Accountants. p. 7 c. ISBN 9781608150373. Accounting Association. Archived from the original on 27 April 16. ^ Sharman, Paul A. (2003). "Bring On German Cost Accounting".
2. ^ (Burns, Quinn, Warren & Oliveira, Management Accounting, 2012. Retrieved 2 November 2011. Strategic Finance (December): 2–9.
McGraw-Hill, London, 2013) 10. ^ Clinton, B.D.; Matuszewski, L.; Tidrick, D. (2011). "Escaping 17. ^ Kilger, Wolfgang (2002). Flexible Plankostenrechnung and
3. ^ "Definition of Management Accounting" (PDF). Institute of Professional Dominance?". Cost Management. New York: Deckungsbeitragsrechnung. Updated by Kurt Vikas and Jochen
Management Accountants. 2008. Archived (PDF) from the Thomas Reuters RIA Group (Sep/Oct). Pampel (12th ed.). Wiesbaden, Germany: Gabler GmbH.
original on 20 October 2016. Retrieved 4 December 2012. 11. ^ Clinton, B.D.; Van der Merwe, Anton (2006). "Management 18. ^ "Consortium for Advanced Management International CAM-I" .
4. ^ "What is Management Accounting? - Definition - Meaning - Accounting - Approaches, Techniques, and Management www.cam-i.org. Archived from the original on 7 October 2017.
Example" . myaccountingcourse.com. Archived from the Processes". Cost Management. New York: Thomas Reuters RIA Retrieved 2 May 2018.
original on 6 October 2017. Retrieved 2 May 2018. Group (May/Jun). 19. ^ Cost Management Section RCA interest group Archived
5. ^ "Global Management Accounting Principles" . 24 October 12. ^ a b Professional Accountants In Business Committee (July 2008-12-07 at the Wayback Machine
2014. Archived from the original on 2015-04-23. Retrieved 2009). "International Good Practice Guidance: Evaluating and 20. ^ "Cost Management" . Thomson Reuters. 2011. Retrieved
2015-04-16. Improving Costing in Organizations" . New York: International November 12, 2011.
6. ^ King, I. "New set of accounting principles can help drive Federation of Accountants: 24. Archived from the original on 4 21. ^ Institute of Management Accounting Archived 2007-12-07
sustainable success" . ft.com. Retrieved 28 January 2015. April 2012. Retrieved 10 November 2011. at the Wayback Machine
7. ^ Ladda, Dr R. L. BASIC CONCEPTS OF ACCOUNTING . 13. ^ * "Taking Control of IT Costs". Nokes, Sebastian. London
Lulu.com. ISBN 9781312161306.[self-published source] (Financial Times / Prentice Hall): March 20, 2000. ISBN 978-0-
8. ^ van der Merwe, Anton (7 September 2011). Presentation at 273-64943-4
IMA's annual conference - Managerial Costing Conceptual 14. ^ "Cima P1 Exam Questions" . Archived from the original on
Framework Session. Orlando, FL: Unpublished. 2016-11-14. Retrieved 14 Nov 2016.

["https://aimsoftech.com/ ">best accounting software]

Further reading [ edit ]

Kurt Heisinger and Joe Hoyle, Managerial Accounting , ISBN 978-1-4533452-9-0.


James R. Martin, Ph.D., CMA, Management And Accounting Web .

External links [ edit ]

CAM-I Consortium for Advanced Manufacturing–International


Library resources about
AICPA Financial Management Center – resource for CPAs working in business, industry and government Management accounting

Institute of Management Accountants – resource for management accountants (CMAs) working in industry Resources in your library

Chartered Institute of Management Accountants


International Federation of Accountants
The Accounting Adventurista Management Accounting
The Institute of Cost Accountants of India

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